Q&A with Don Peppers: A CX Expert’s View on Digital Transformation and the Customer Experience

The digital revolution has opened up vast new possibilities for improving the customer experience. Online interactions, high-speed data processing, and data analytics offer a panoply of ways for businesses to know, engage, and provide value to customers. At the same time, many companies in retail and other industries are still finding their way in this unfamiliar new terrain.

What are the keys to mastering CX in a time of digital disruption? We asked Don Peppers, a Treasure Data advisor, to share his viewpoint with readers. Don is a pioneer of one-to-one marketing and a renowned authority, author, and speaker on customer experience. He has written a number of influential books such as Extreme Trust (with co-author Martha Rogers) and Customer Experience: What, How and Why Now.

In a recent conversation, Don talked about the rapid changes he’s seeing, how leading companies are adapting, and what the future holds.

In a recent webinar, Don Peppers talked with Treasure Data CMO Tom Treanor about the increasing importance of data in the COVID era.

Treasure Data: You’ve had a long career as a thought leader in this field. In recent years, what’s the biggest change you’ve seen in how leading companies engage and build relationships with customers?

Don: The biggest change by far is the dramatic acceleration in digital transformation precipitated by the COVID-19 crisis. Many analysts are suggesting that most companies have made 5 to 10 years of progress in their digital transformation in the last few months, and I see no reason to question that judgment. The more digital you are, the more potential there is to gain advantage through personalization and personalized strategies.

Treasure Data: What do you think the long-term effect will be?

Don: The long-term effect is that companies are being dragged kicking and screaming across the digital divide. They’re all going to get there, sooner and later.

The problem is that business leaders often don’t realize the immense realignment required in their organizations in order to run a business which is based on using digital technology to treat different customers differently. That requires new metrics and incentives. It requires a different culture at the company. It requires aligning accountabilities with customers, rather than just with products and brands.

Companies have a hard time with this, because they’re built around products and brands—that’s their organizational structure. So making that shift is not easy to do. The availability of customer data empowers them to do it, along with interactive technology. However, it requires more than just installing machinery.

Treasure Data: So if a company is trying to tackle this transition, what are the first big steps it needs to take?

Don: Step one is to recognize that a digital strategy is qualitatively different from a physical strategy. In a physical strategy, you’re a product-based company and you’re trying to find more customers for the products you have to sell.

In a digital environment, you treat different customers differently. You’re talking to individual customers, and you’re trying to find more products and services for the customers you’re interacting with. That’s a different dimension of competition. Instead of just satisfying one customer need at time and selling it to as many customers as you can get, you’re trying to focus on one customer at a time and satisfy as many of that customer’s needs as possible.

Treasure Data: When you look at the businesses that are getting customer relationships right, what specific things are they doing?

Don: The most positive thing some companies are doing is focusing more and more on what my business partner and co-author Martha Rogers and I call trustability—proactive trustworthiness.

The more we interact—and we interact more now than we ever did before—the more valuable trust is, because trust takes out the friction. I don’t have to count my change at the supermarket because no one cheats you on change anymore. And increasingly, you’re seeing those kinds of practices go online as companies make trustability into a competitive advantage.

Amazon’s a great example. One time, three or four years ago, I was online and I saw this book by two Wharton professors, and I thought, wow, I ought to get that book. So I go to Amazon and I click on the book and I get a warning: “You already bought this book from Amazon. Are you sure you want another copy?” No, I don’t want another copy, thank you very much.

It would not have been cheating for Amazon to just sell me the book. But they used their database, which is obviously better than my database, to remind me of something that I probably didn’t want to do. Amazon could have made a profit on that transaction, but they declined the immediate profit. In order to get what? My long-term trust. My advocacy of them as a customer-friendly company. My goodwill is what they wanted.

Treasure Data: Let’s say a company is trying to become more personalized, more trustworthy, more focused on the customer. How does customer data help with that transition?

Don: In the days of mass marketing, you had marketing research surveys—so you could see that, for instance, recently divorced fathers of young children have certain needs in general. But these days, you can use customer data platforms to take individual records of individual customers, and over time develop a real profile.

One of the most important things about customer insight is it allows you to deliver a more relevant customer experience, and relevance is a really important quality. Even if all you’re doing is remembering what the customer told you before, that’s better than many companies are capable of doing today.

For example, I stayed at a Ritz-Carlton hotel in Atlanta. I like to do room service when I’m working, and usually I order a pizza. And I like my pizzas with red pepper flakes, so I always have to remember to order red pepper flakes from the hotel.

So I call downstairs for a room service pizza, and in comes a waiter with a pizza. And I think oh, I forgot the pepper flakes. But then he reaches under the table and pulls out a little dish of red pepper flakes, pulls the cellophane off and puts it next to the pizza, and starts out the door.

I think, wow, a hotel that knows how to serve a pizza, finally! And I say, “Wait, excuse me sir, do you serve red pepper flakes with all your pizzas?” He gets flustered and he says, “No sir, but Mr. Peppers, you like red pepper flakes, don’t you?”

I’d forgotten that I’d ordered a pizza from the Ritz-Carlton in Laguna Niguel, across the country, a few months ago when I was there. And they’d written it in my profile. So they were able to give me a more relevant customer experience.

That’s the power of digital technology. There wasn’t a person who called up the Laguna Niguel hotel and asked them to look it up in their records. The data went into a CDP, or into somebody’s CRM platform. This kind of personalization is easy to do, and yet many companies aren’t capable of making it happen.

Treasure Data: So what’s the exact role of CDPs, in particular, in making this kind of personalization possible?

Don: I see three principal capabilities that these technologies make available.

One capability is the data itself, the database and the analytics. I don’t have to run to my file cabinet to pull out the customer’s file folder to see what they’re doing, or what they want, or what they told us before. I have it at my fingertips, and my contact center person has it at her fingertips, my desk clerk has it at his fingertip, etc. That’s the data side.

But in addition to data, there’s the interaction side. It used to be that if you wanted to interact with a customer, you had to do it face to face or on the phone, or God help you, by postal mail in six-week waves. But today’s technology gives us many ways to interact with a customer, in an instant, and for tenths of a penny. The result is that the direction of the marketing process itself can be reversed. Instead of “Here’s what we made, who wants it?” today’s marketer can ask “What is it that you want, or how do you want it? I’ll make it for you that way.”

The third leg of the stool is customization. For instance, let’s say I’m a clothing retailer and you’re my customer, and you’re a man, you’re partial to gray and black, you like Armani brands and Ferragamo shoes, so you’ve got high-class tastes. I have all that down, and when you come to my website, I have a booster for Ferragamo and Armani and colors. I have a filter that doesn’t show you women’s products, if you haven’t bought any women’s products. It doesn’t show you children’s products, if you haven’t bought any children’s products.

Now I’m treating you differently, based on the data I have on file about you as an individual, much of which comes from the interactions we’ve already had. But it’s entirely automated; it’s all in lines of code because of these technologies. It’s machine-driven customization.

These technologies continue to hurtle at us at the exponential speed of Moore’s Law. Everyone will be dragged into the digital future, sooner or later. COVID just sped this process up a bit.

See our related post to improve insights via CX analytics.

For more insights from Don Peppers, watch his recent webinar with Treasure Data CMO Tom Treanor—Increasing Importance of Data in the COVID Era.